Learn about mining algorithms
Mining algorithms are the backbone of blockchain-based networks such as Bitcoin and other protocols.
In blockchain technology, mining algorithms are necessary for transaction verification and network security. The mining algorithm instructs the miner’s computer to follow a set of rules to produce valid blocks.
Proof of Work (PoW) is a well-known consensus algorithm used by Bitcoin and other cryptocurrencies. In PoW, miners compete using computing power to find a specific hash value that will provide them with new blocks. Application Specific Integrated Circuits (ASICs) are the specialized hardware necessary for miners to remain competitive in this energy-intensive process, but before ASICs, users had smaller-scale CPU and GPU mining rigs at home.
ASIC mining mainly uses the SHA-256 hash function, which was designed by the National Security Agency (NSA) and published in 2001 as a data integrity standard. Bitcoin uses SHA-256 to ensure maximum security and integrity, as the slightest change to the algorithm changes the output of the mining hash function.
To keep up with industrial-scale mining operations, many miners join mining pools to combine their computing power and thereby increase their chances of successfully mining a block. Block rewards are distributed proportionally based on each member’s contribution.
Choosing a mining algorithm is a crucial decision for a cryptocurrency project, as it determines the rules and requirements needed to create and secure a blockchain network, rather than how participants are rewarded with newly minted coins. Examples of other popular mining algorithms include Ethash used by the Ethereum blockchain and CryptoNight used by the Monero network.
What is the CryptoNight algorithm?
CryptoNight is one of the fastest mining algorithms and is part of the CryptoNote consensus protocol.
CryptoNight is a PoW mining algorithm for CPU and GPU mining, designed to resist ASIC and prevent the concentration of mining power. It hopes to help users mine more efficiently by using a combination of hash functions, including CryptoNight and Keccak hash functions.
Its cryptographic hash function works around the Advanced Encryption Standard (AES), a military-grade algorithm with extremely high security, making CryptoNight a highly security-focused mining algorithm. CryptoNight’s reputation as a secure algorithm has been strengthened in the crypto world since Monero started using it as the hashing algorithm for blockchain consensus.
The creation of the CryptoNight algorithm is fascinating and harkens back to the origins of Bitcoin. Its creator—pseudonym Nicholas van Saberhagen—disappeared, just like the famous Satoshi Nakamoto.
Given the similarities, many believe the two developers are the same person, and CryptoNote’s eerie release date of December 12, 2012 (12/12/2012) further enhances the mystery. CryptoNote is a security protocol and privacy tool that facilitates confidential transactions, unchainable transactions, and ring signatures.
How does the CryptoNight mining algorithm work?
CryptoNight uses the CryptoNote consensus protocol to enhance privacy so that no one can know which participant in the transaction is paying and who is receiving the money.
CryptoNight is suitable for GPU mining, but its characteristics make it very suitable for CPU mining. The CPU architecture is very efficient with its set of fast 64-bit multipliers for maximum speed; in addition, extensive use of the CPU cache ensures optimal performance.
Its working process mainly includes three steps:
Create a “scratchpad”
A large memory with intermediate values is stored during the hash function. The first input data is hashed using the Keccak-1600 hash function to produce 200 bytes of randomly generated data.
Encryption transformation
It then takes the first 31 bytes of the Keccak-1600 hash value and converts them into an encryption key for the AES-256 algorithm, which is the highest value in the AES family.
final hash
CryptoNight takes the entire data set created by the AES-256 and Keccak functions in the previous step and passes it to the remaining hash functions. Ultimately, the CryptoNight proof-of-work produces the final hash value. This hash has a 256-bit file extension or a total of 64 characters.
Why is crypto night important?
CryptoNight is designed to give CPUs and GPUs an equal opportunity to mine blocks and prevent the use of ASIC miners.
CryptoNight is important for three key reasons: it provides greater privacy through untraceable transactions, ASIC resistance, and scalability. Most cryptocurrencies, including Bitcoin (BTC), are almost always private, as someone’s transactions and balances can be easily tracked on the open-source blockchain through public addresses.
CryptoNight, on the other hand, is designed to cater to more privacy-conscious users who want to perform private blockchain transactions. Its creators integrated two key privacy tools into the algorithm for maximum security and anonymity: ring signatures and stealth addresses, both developed by the Monero team.
One of the key reasons for the development of CryptoNight was to alleviate the growing concerns about cryptocurrency centralization posed by ASIC mining rigs. The developers of this project are focused on challenging the dominance of ASICs and improving systems where GPUs and CPUs can maintain a competitive advantage in mining.
Scalability and high efficiency are also the core of CryptoNight. Its computing volume increases exponentially, ensuring greater scalability through faster transactions.
Which cryptocurrencies use the CryptoNight mining algorithm?
Bytecoin was the first cryptocurrency to apply the CryptoNote protocol to its blockchain, but its implementation on Monero helped the project gain even more fame and notoriety.
Many cryptocurrencies have integrated the CryptoNight algorithm. The first example is CryptoNoteCoin, which explicitly references the CryptoNight project.
bitcoin
Although initially committed to resisting ASIC dominance, the first CryptoNight token supporting the development of the project announced in 2018 that it would integrate ASIC mining while preserving the algorithm to prevent security and anonymity issues.
Monero
Although Monero no longer uses CryptoNight, it has become one of its strongest supporters due to its stance against ASIC power. Monero inherited CryptoNight as its proof-of-work in 2014, and since then has made slight improvements to the algorithm, creating CryptoNight-R to intentionally break compatibility with existing ASICs.
However, Bitmain developed efficient ASIC-compatible CryptoNight in 2017, and by 2018, ASIC rejoined the Monero network. In 2019, Monero changed its mining algorithm to RandomX and focused on CPU mining.
Electronics (ETN)
Electroneum uses the CryptoNight mining algorithm, and its mobile version has significant innovations, allowing users not only to mine cryptocurrency through traditional methods, but also to mine cryptocurrency using their smartphones through mobile miners.
Other lesser-known projects implementing the CryptoNight algorithm include Boolberry, Dashcoin, DigitalNote, DarkNetCoin and Pebblecoin. However, these projects suffered malicious attacks in 2017, raising concerns about their network security and the reliability of the CryptoNight algorithm.
Different variants of the CryptoNight algorithm have been created, with CryptoNight Heavy being a version of the hashing algorithm. It is implemented in various cryptocurrency projects, including Ryo currency, Sumokoin, and Loki.
However, because CryptoNight Heavy relies on an untrusted peer-to-peer network, it could lead to serious vulnerabilities. Because nodes must check the PoW of each new block and spend a lot of time evaluating each hash, they may be more vulnerable to decentralized denial of service (DDoS) attacks, coordinated botnet targeting activities, and flooding the network with fake traffic.
What is the future of the CryptoNight algorithm?
Since its launch in 2012, the CryptoNight algorithm has undergone major changes, upgrades, and minor modifications to accommodate different cryptocurrency projects until the launch of the final version created by Monero, CryptoNight-R.
Is CryptoNight still a valid mining algorithm, or does it fail in its mission of being an egalitarian tool? All the different versions have a common goal: to resist ASICs and prevent them from further dominating the cryptocurrency mining space.
Many believe this did not happen and that the project failed to live up to its original stance. The Monero team said the failure was for security reasons. Since verification of CryptoNight hashes is quite expensive and time-consuming, it may pose a DoS risk to nodes, as has been previously highlighted for certain CryptoNight-based cryptocurrencies.
Others believe it has done its best to prevent further expansion of ASIC’s corporate power. It was born as an egalitarian type of algorithm that guarantees equal mining rights for people, not just the corporate world.
Although ASIC resistance is no longer feasible, it can still serve as a mining tool open to everyone, as ASICs are able to adapt and successfully mine the algorithm. Still, it can be a good starting point for developing future cryptocurrency projects, especially for users who value privacy and fair mining.
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